LEGISLATIVE BUDGET BOARD
Austin, Texas
FISCAL NOTE, 77th Regular Session
May 4, 2001
TO: Honorable Ron E. Lewis, Chair, House Committee on Energy
Resources
FROM: John Keel, Director, Legislative Budget Board
IN RE: SB310 by Harris (Relating to the continuation and
functions of the Railroad Commission of Texas.),
Committee Report 2nd House, Substituted
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* Estimated Two-year Net Impact to General Revenue Related Funds for *
* SB310, Committee Report 2nd House, Substituted: negative impact *
* of $(2,356,875) through the biennium ending August 31, 2003. *
* *
* The bill would make no appropriation but could provide the legal *
* basis for an appropriation of funds to implement the provisions of *
* the bill. *
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General Revenue-Related Funds, Five-Year Impact:
****************************************************
* Fiscal Year Probable Net Positive/(Negative) *
* Impact to General Revenue Related *
* Funds *
* 2002 $(1,108,305) *
* 2003 (1,248,570) *
* 2004 (1,500,550) *
* 2005 (1,489,550) *
* 2006 (1,651,815) *
****************************************************
All Funds, Five-Year Impact:
***********************************************************************
*Fiscal Probable Probable Probable Probable Change in *
* Year Savings/ Revenue Savings/ Revenue Number of *
* (Cost) from Gain/(Loss) (Cost) from Gain/(Loss) State *
* General from Oil Oil Field from Oil Employees *
* Revenue Field Cleanup Field from FY 2001 *
* Fund Cleanup Account/ Cleanup *
* 0001 Account/ GR- Account/ *
* GR- Dedicated GR- *
* Dedicated 0145 Dedicated *
* 0145 0145 *
* 2002 $9,103,280 $0 25.0 *
* $(1,233,305) $(7,968,202) *
* 2003 (1,373,570) 9,121,280 0 35.2 *
* (10,027,669) *
* 2004 (1,625,550) 9,162,280 (9,438,585) 0 39.2 *
* 2005 (1,614,550) 9,162,280 (9,172,679) (4,000,000) 41.2 *
* 2006 (1,776,815) 9,162,280 (9,143,671) (3,800,000) 43.3 *
***********************************************************************
*****************************************************
* Fiscal Year Probable Revenue Gain/(Loss) from *
* General Revenue Fund *
* 0001 *
* 2002 $125,000 *
* 2003 125,000 *
* 2004 125,000 *
* 2005 125,000 *
* 2006 125,000 *
*****************************************************
Technology Impact
The bill would require new personal computers for the additional FTEs.
Fiscal Analysis
The bill would continue the Railroad Commission (RRC) for 12 years. The
bill would also do the following:
* Raise rates on oil regulatory fees from 5/16 of a cent to 5/8 of one
cent per barrel of 42 standard gallons.
* Raise rates on gas regulatory fees from 1/30 of a cent to 1/15 of a
cent per thousand cubic feet.
* Increase fee for drilling permits by $100.
* Add a non-refundable fee of $200 when Rule 37 spacing or Rule 38
density exception review is
requested.
* Increase expedite request fees from $50 to $150.
* Raise extension of time to plug a well application fees from $100 to
$300.
* Change the fee for "good guy option" from $100 to $1,000 and changes
the nonrefundable annual fee from 3% to 12 1/2% for a bond that would
otherwise be required.
* Raise the Oil Field Cleanup Account (OFCU) cap from $10 to $20 million
and raise the floor from $6 million to $10 million.
* Require the RRC to establish performance goals for site investigations
and environmental assessments; abandoned wells to be plugged; and
surface locations to be remediated.
* Require the RRC to perform risk assessment and prioritization of high
risk wells and periodic testing high risk wells.
* Require the RRC to establish a Voluntary Cleanup program.
* Require organization reports filed to be accompanied by a fee not to
exceed $1,000.
* Amends fees for Exception to RRC rules from $50 to $150. Two-thirds
of fee shall be deposited to OFCU.
* Amend fees for well category determination from $50 to not to exceed
$150.
* Amend fluid injection fee from $100 to $200 and permit to discharge
to surface water fees from $200 to $300.
* Require the utility division of the State Office Administrative
Hearing (SOAH) to conduct contested case hearings related to gas
utilities.
* Provide for liens on abandoned wells.
* Would require enforcement of pipeline safety.
* Change gas utilities from defined monopolies to "may be"
monopolies.
* Would allow municipalities to cede rate jurisdiction to the RRC.
Methodology
The RRC estimates revenue gains and losses to the OFCU that would result
in an annual net gain to the OFCU of approximately $9 million annually.
The breakdown is as follows:
* Rate raises on oil regulatory fees would generate an additional $1.5
million;
* Rate raises on gas regulatory fees would generate an additional $1.3
million;
* Increase in application fees by $100 would generate an additional $1
million;
* Rule 37 or 38 non refundable fee would generate new revenue of $5,000;
* Increase for expedite fees from $50 to $150 would generate an
additional $650,000;
* Changes from $100 to $300 for an extension of time to plug would
increase revenue by $500,000;
* In regard to the change of fee from $100 to $1,000 for the "good guy
option" and the changes for the nonrefundable annual fee from 3% to 12
1/2%, the RRC assumes that bonding options being used would cause a
revenue reduction of $101,000 each year. A revenue change is not expected
for the bonding option change from 3% to 12 1/2%.
* Voluntary Cleanup fees would generate $40,000 in FY 2002 and $60,000 in
FY 2003;
* Increase in organization report fees would generate an additional $3.5
million each year in additional revenue.
* Exception to RRC rule fees would generate and additional $468,000 each
year.
* Increase in fluid injection fee would generate an additional $220,000
each year and surface discharge fee increases would generate an
additional $10,000 per year.
* Liens on abandoned well would generate an additional $38,000 in the
first year, and $36,000 in the second year and $77,000 each year
thereafter.
The RRC estimates a gain to General Revenue from increase in fees for
well category determination that will generate an additional $125,000 per
year in General Revenue.
The RRC estimates loss from universal bonding to OCFU in FY 2005 of $4
million and $3.8 million on FY 2006.
RRC estimates that they would be able to plug an additional 748 wells in
FY 2002 and an additional 1,003 wells in FY 2003. The RRC estimates that
they would require contractual services of $3.3 million for well plugging
in FY 2002 and $4.5 million in FY 2003. The contractual amount is based
on $4,473 per well plugged.
RRC estimates that they would be able to perform an additional 85 site
cleanups in FY 2002 and an additional 109 sites cleanups in FY 2003. RRC
estimates that they would require $1.9 million for contractual services
for site cleanup in FY 2002 and $2.4 million in FY 2003. Each
contractual site cleanup is projected to cost $22,000. The site cleanups
will also require $84,845 and $196,094 of temporary employee services
for FY 2002 and FY 2003 respectively.
According to the RRC, the additional well plugging and site cleanup would
require an additional 8 FTEs (Engineer Specialists) in FY 2002 at a cost
of $280,000 and an additional 16.25 FTEs (Engineer Specialists) in FY
2003 at a cost of $569,000. The new FTEs would require field equipment,
vehicles and computer equipment. There would also be operating and travel
expenses.
RRC estimates that in FY 2004-05 the number of wells plugged will be
increased by 149 and the number of sites cleaned will be increased by 16
for a total increase in expenditures of $1,018,477 out of OFCU each year.
In FY 2006 the RRC estimates that an additional 150 wells will be
plugged and additional 16 sites will be cleaned for an increase of
$1,022,950 in expenditures out of OFCU.
RRC estimates that the requirement that the RRC perform risk assessment
and prioritization of high risk wells and periodic testing of high risk
wells would require 3 FTEs and would cost approximately $1.9 million each
year. RRC anticipates that it will require 3 FTEs (Engineer
Technicians), at a cost of $100,000. These FTEs would periodically test
the high risk wells by conducting a fluid level or pressure test. The
additional FTEs will also require field equipment and vehicles estimated
to be $100,000. There are approximately 17,000 abandoned wells in the
state and it is estimated that 3 FTEs can perform 2,833 fluid level tests
per year. In addition, the RRC estimates that it will require
contractual services of $1.7 million per year to perform the more
expensive pressure tests. It is estimated that one-half of the wells will
require pressure tests at a cost of $1,200 per well for a total of $1.7
million.
RRC estimates that the costs for establishing a Voluntary Cleanup program
in order to assist and provide technical oversight would require 1 FTE
each year and would cost approximately $84,000 in the first year and
approximately $55,000 each subsequent year.
RRC has estimated that the annual costs resulting from the transfer of
all contested case hearings related to gas utilities from the RRC to
SOAH would be $247,050 per year. SOAH has indicated that 4 FTEs would be
required to perform the responsibilities of handling those hearings. This
would be paid to SOAH by RRC through an interagency billings. There will
not be any savings to the RRC because they will need to retain staff in
the office of general counsel since they will still be a party to the
rate cases.
Costs for well category determination will run $125,000 per year which
includes 1 FTE at a cost of approximately $32,000 per year plus benefits.
According to the RRC costs for enforcement of pipeline safety include 1
FTE in a coordinating function a cost of $53,000 per year plus benefits
and a computer.
RRC estimates that it would require 5 FTEs (2 utility specialists and 3
Attorneys) at a cost of $265,500 per year plus benefits and $250,000 each
year for economist - consulting services litigation to determine if
utilities are in fact monopolies and subject to regulation. Additional
operating expenses $19,900 per year as well as computers in the first
year.
According to the RRC allowing municipalities to cede rate jurisdiction to
the RRC would require 2 FTEs in the first year and 2 additional FTEs in
the second with increasing FTEs in the following years. The RRC
estimates a cost of $162,265 in FY 2002 and $319,030 in FY 2003 to GR as
the result of the increases in rate cases processed per year as a result
of this provision.
Local Government Impact
No significant fiscal implication to units of local government is
anticipated.
Source Agencies: 116 Sunset Advisory Commission, 455 Railroad
Commission of Texas, 360 State Office of
Administrative Hearings, 304 Comptroller of Public
Accounts
LBB Staff: JK, CL, SC, SK